Good April Tax Collections, but State is Spending More Than Revenue

Two new reports show that Pennsylvania’s fiscal crunch for the current year is not a dire as previously thought.

Pa. Department of Revenue monthly reports on tax collections shows higher than forecast General Fund revenues in both March and April. For the year to date, the state is still $288 million behind estimates, but the shortfall is much smaller than when Gov. Corbett outlined his budget proposal.

Based on the latest data, the Independent Fiscal Office’s revenue estimates for 2011-12 are about $400 million higher than those included in the Governor’s budget in February. Many have already used these trends to call for increases in government spending.

Unfortunately, the state is still spending about $800 million more than net revenue collections this year. As the General Fund began the year with more than $1 billion still on hand, and Gov. Corbett froze about $160 million from the enacted budget, the state will be able to pay all its bills and still legally have a balanced budget.

Nonetheless, spending more than revenue is clearly an unsustainable trend.

Pennsylvania FY 2011-12 General Fund Revenues and Spending
July 2011 projection Feb 2012 estimates April 2012 IFO revenue estimate
Beginning Balance $1,072,863 $1,087,613 $1,087,613
Net Revenue after Refunds $26,571,000 $25,811,936 $26,201,000
Total Funds Available* $27,706,863 $27,094,549 $27,511,000
Total Spending** $27,149,000 $27,001,435 $27,001,435
End Balance $417,863 $93,114 $482,178
Revenue less Spending -$578,000 -$1,189,499 -$800,435
*Includes prior year lapses; ** Includes budgetary freezes

More importantly, the current year’s fiscal problems are dwarfed by the four-alarm fire facing the state budget. Welfare spending, corrections costs, debt payments and pension obligations threaten to consume even more tax dollars in the future.

Unless we prepare for these future costs with budgetary reforms, including limiting the growth in state spending, taxpayers will be burdened with new and higher taxes, or major cuts will have to occur in other state programs.